We were among the first to argue that disruption related to the COVID-19 outbreak would bring an end to the world economy’s 43-quarter growth streak. Now that the coronavirus has become a pandemic, the costs to the world economy have risen significantly. Our revised forecasts now include recessions in the euro-zone and Japan. The US will teeter on the brink of one too. We have pencilled in global GDP falling by 1.2% q/q in Q1, led by contractions in Asia. This is not far short of the 1.6% drop in world output seen at the depth of the global financial crisis in Q4 2008. A rebound in Chinese activity should help world output to recover in Q2, despite a contraction in output outside of China. Nonetheless, in 2020 as a whole, global growth is on course to weaken to about 1.5%, down from 2.9% in 2019. And given the uncertainties involved, there is a clear risk of a sharper downturn.
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